0 saved
12.6K views
This model is a reminder to cut your losses and focus on future opportunities rather than getting pulled down by past decisions.
Deque his rebus satis multa in nostris de re publica libris sunt dicta a Laelio. Isto modo, ne si avia quidem eius nata non esset. Ubi ut eam caperet aut quando? A villa enim, credo, et: Si ibi te esse scissem, ad te ipse venissem. Bork
Duo Reges: constructio interrete. Si verbum sequimur, primum longius verbum praepositum quam bonum. Et ille ridens: Age, age, inquit,-satis enim scite me nostri sermonis principium esse voluisti-exponamus adolescenti,. Prodest, inquit, mihi eo esse animo. Animi enim quoque dolores percipiet omnibus partibus maiores quam corporis. Claudii libidini, qui tum erat summo ne imperio, dederetur. Oculorum, inquit Plato, est in nobis sensus acerrimus, quibus sapientiam non cernimus.
- Ask, ‘does this cost have an impact on what will happen in the future?’
Identify Sunk Co ... Lorem ipsum dolor sit amet, consectetur adipiscing elit. Quid, si etiam iucunda memoria est praeteritorum malorum? Sed erat aequius Triarium aliquid de dissensione nostra iudicare. Ut proverbia non nulla veriora sint quam vestra dogmata. Sit enim idem caecus, debilis. Etiam beatissimum? Si verbum sequimur, primum longius verbum praepositum quam bonum. Duo Reges: constructio interrete. Quo tandem modo? Paulum, cum regem Persem captum adduceret, eodem flumine invectio? Vitae autem degendae ratio maxime quidem illis placuit quieta. Quia voluptatem hanc esse sentiunt omnes, quam sensus accipiens movetur et iucunditate quadam perfunditur. Itaque eos id agere, ut a se dolores, morbos, debilitates repellant. Illa argumenta propria videamus, cur omnia sint paria peccata. Videmusne ut pueri ne verberibus quidem a contemplandis rebus perquirendisque deterreantur? Consequentia exquirere, quoad sit id, quod volumus, effectum. Mene ergo et Triarium dignos existimas, apud quos turpiter loquare? Quamquam id quidem, infinitum est in hac urbe; Suam denique cuique naturam esse ad vivendum ducem. Innumerabilia dici possunt in hanc sententiam, sed non necesse est. Ut scias me intellegere, primum idem esse dico voluptatem, quod ille don. Quia dolori non voluptas contraria est, sed doloris privatio. Uterque enim summo bono fruitur, id est voluptate. Sed eum qui audiebant, quoad poterant, defendebant sententiam suam.
Identifying a Sunk Cost can be difficult when there is no precise way of comparing a loss to a gain. The desire to not appear wasteful also can limit your ability to base a decision on relevant costs exclusively, especially when you feel personally responsible for the investments representing sunk costs.
The Concorde Fallacy.
The Concorde Fallacy is an alternative name for the sunk cost fallacy, coming from the way the British and French governments continued to co-fund the development of the expensive Concorde supersonic aeroplane even after it became financially untenable. Their previous investment, financially and politically, was thought to determine the ongoing funding.
Eat too much?
A common example of the sunk cost fallacy is when someone buys a large meal, then overeats to ensure ‘they get their money worth’.
The sunk cost fallacy is an unconscious bias that arises from accounting and financial domains. It is an important consideration in decision making.
Use the following examples of connected and complementary models to weave the sunk cost fallacy into your broader latticework of mental models. Alternatively, discover your own connections by exploring the category list above.
Connected models:
- Cost-benefit analysis: to consider actual pros and cons of a choice
- Opportunity cost: to consider the potential loss of a future facing decision.
Complementary models:
- First principle thinking: in breaking down a situation to its basics.
- Inversion: considering the opposite, e.g. ‘how can we continue to make that loss again?’
- The Lindy effect: to challenge sunk costs and seeing past longevity as a potential positive.
- Availability heuristic: being overly impacted by immediate situations and losses.
- Lock-in effect: is there greater friction to breaking from the status quo.
Read N. Gregory Mankiw’s Principles of economics for information on various economic theories that involve the concept of sunk costs.
This brief article references some of the relevant studies arising from Behaviorual Economics and the Sunk Cost fallacy. Check this video resource for a quick overview of the sunk cost concept and how it applies to the Concorde supersonic plane case.
My Notes
Oops, That’s Members’ Only!
Fortunately, it only costs US$5/month to Join ModelThinkers and access everything so that you can rapidly discover, learn, and apply the world’s most powerful ideas.
ModelThinkers membership at a glance:
“Yeah, we hate pop ups too. But we wanted to let you know that, with ModelThinkers, we’re making it easier for you to adapt, innovate and create value. We hope you’ll join us and the growing community of ModelThinkers today.”
You Might Also Like:
- Actionable summaries of the world's most powerful ideas.
Subscribe now and download this practical guide to transform your thinking, plus recieve one short, powerful and actionable idea in your inbox each month.